Note 12. Income Taxes

The sources of income before income taxes for the fiscal years ended October 31, 2021 and  October 31, 2020 are as follows:

The components of the provision for income taxes for the fiscal years ended October 31, 2021 and  October 31, 2020 are as follows:

For the fiscal years ended October 31, 2021 and  October 31, 2020, the income tax provision differs from the expected tax provision computed by applying the U.S. federal statutory rate to income before taxes as a result of the following:

The tax effects of the temporary differences giving rise to the Company’s net deferred tax liabilities for fiscal years ending October 31, 2021 and at October 31, 2020 are summarized as follows:

As of October 31, 2021, the Company has the following tax carryforwards:

The Company has provided U.S. deferred taxes on cumulative earnings of all of its non-U.S. affiliates.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, carryback opportunities, and tax planning strategies in making the assessment.  The Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowance provided. The valuation allowance provided by the Company relates to foreign tax credit carryforwards.

The following table summarizes the changes in the Company's unrecognized tax benefits during the years ended October 31, 2021 and 2020. The Company expects no material changes to unrecognized tax positions within the next twelve months. If recognized, none of these benefits would favorably impact the Company's income tax expense, before consideration of any related valuation allowance:

As of October 31, 2021 and 2020, the company has recognized no interest or penalties.

On May 24, 2021 the House of Commons in the U.K. enacted legislation, the Finance Act 2021, which increases the UK corporation tax rate from 19% to 25% effective April 1, 2023, for companies with profits in excess of GBP 250,000. As a result of the Finance Act 2021 the Company recorded tax expense of $2.2 million related to the remeasurement of certain deferred tax assets and liabilities that are expected to reverse after April 1, 2023.

On March 17, 2020, the House of Commons in the U.K. passed a Budget Resolution under the Provisional Collection of Taxes Act of 1968 (the "Budget Resolution").  The Budget Resolution substantively enacted an increase in the U.K. corporate tax rate for tax periods after March 31, 2020 from 17% to 19%.  As a result of the Budget Resolution, the Company recorded tax expense of $0.9 million related to the remeasurement of deferred tax assets and liabilities to reflect the increase in the U.K. corporate tax rate.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security "CARES" Act into law. The CARES Act included several significant business tax provisions that, among other things, eliminated the taxable income limit for certain net operating losses ("NOL") and allowed businesses to carry back NOL's arising in 2018, 2019 and 2020 to the five prior years, accelerated refunds of previously generated corporate alternative minimum tax credits, generally loosened the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax provisions.

During fiscal years 2016 and 2017, the Company paid federal income taxes totaling $4.3 million (at a federal income tax rate of 34%). As the Company generated NOL carryforwards during fiscal 2018 and 2019, the CARES Act allowed the Company to carry back those NOL's to the fiscal 2016 and 2017 tax returns. During fiscal 2020, the Company carried back all NOL's that were generated in fiscal year 2018 to the 2016 and part of the 2017 tax returns and also carried back a portion of the NOL's accumulated during fiscal 2019 to the remaining income from the 2017 tax return.  These carrybacks resulted in a revaluation of the NOL carryforwards from the 21% federal rate in effect prior to the CARES Act to 34%, which was the federal income tax rate for 2016 and 2017. On March 31, 2020, the Company received a demand letter alleging that the Company is required to remit to the prior shareholders of CPH (before the Company went public in December 2018) certain tax refunds from carrying back certain NOL's made available as a result of the passage of the CARES Act.  In October 2020, the Company reached a settlement with the prior shareholders of CPH, resulting in the Company agreeing to pay $2.0 million of the $4.3 million in refunds to the prior shareholders of CPH. This $2.0 million charge was recorded in general and administrative expenses in the accompanying consolidated statements of operations.  Following the $1.4 million revaluation in the carrying value of the NOL's as a result of the carryback benefit at a higher tax rate, the net financial impact to the Company is a $0.6 million loss.  The corresponding due to related party is included in accrued expenses and other current liabilities as of October 31, 2020 in the accompanying consolidated balance sheets. This was settled in 2021 as the income tax refunds from the IRS were received.